Ready to Retire: 7 Important Reasons to Have a Retirement Plan

Retirement on your mind? If you plan on leaving the workforce at a decent age, then you should start retirement planning now. There are several important reasons why you should have a retirement plan.

1. Flexibility

A retirement plan lets you roll with the punches a little bit easier. When an emergency or unforeseen event occurs, a retirement plan can offer the financial stability you need. For example, if you suddenly decide to buy a new home or your child has a financial crisis, you will be able to spare up-front cash.

2. Employee Matching Equals More Money

If your employer offers price matching for retirement plan contributions, you need to capitalize on the opportunity to earn free money. You can easily double your retirement contributions using employer matching, which leads to more money in your retirement account when you need it.

3. The More You Save, the More You Have

Starting now means that you will save significantly more than if you started your retirement plan later. Waiting to start your retirement plan will result in larger contributions, and less extra cash, than if you started now.

4. Plan for the Next Generation

Estate planning might not be on your mind right now, but you should consider this angle carefully. Having a comfortable retirement plan means that you’ll lessen the burden on the future generation, i.e. your children. During retirement, you’ll be better prepared to handle illness, relocation or anything else that is thrown your way if you have a nice nest egg.

5. Medical Expenses

A retirement plan can be used for much more than just living expenses. You’ll need to use your retirement funds in the event of a medical crisis. Aside from a medical catastrophe, age brings increased risk for healthcare needs. If your insurance can’t fully cover your expenses, your retirement funds will likely be your next line of defense for medical costs.

The truth of the matter is that Social Security is a very burdened system. More than half the people who pay into Social Security are becoming beneficiaries, which is placing a strain on the ability of the system to pay. If Social Security dissipates, your retirement plan will need to be robust to provide the cash you’ll need for living expenses.

7. Pensions are a Thing of the Past

While some jobs still offer pensions, they are few and far between. Even if your job offers a pension, it could fail. Why? People are living longer than ever, for starters. This means employers are paying out for longer than the pension-system initially planned. Business turmoil, such as bankruptcy, can occur and employers might have to cut pension benefits to measure up to the financial demands of pension administrators.

Regardless of your age, now is the time to start a retirement plan. If you currently have a retirement plan, consider increasing your contributions if possible. The longer you are contributing, the better prepared you’ll be to handle these seven reasons to have a retirement plan.